Earnings Calendar: November 7-11

Earnings season turns to the retail sector this week, headlined by big box stores Walmart, Target, Home Depot, and Lowe’s. An array of other retailers are also penciled in including Macy’s, TJX, Gap, and Foot Locker. We will also have some of the last updates of the season from the semiconductor space from NVIDIA and Applied Materials.

Chinese stocks will also be under the spotlight, headlined by Alibaba, Tencent, and JD.com. Meanwhile, we will also have news from Singaporean outfits Sea and Grab.

Telecoms giant Vodafone, fashion brand Burberry as well as commercial property landlords Land Securities and British Land are the key updates to watch in the UK.

Walmart (WMT) vs Target (TGT)

We have seen Walmart and Target both issue multiple profit warnings this year as they try to adapt to the effects of persistent inflation, which has squeezed margins and caused dramatic changes in consumer shopping habits that has wreaked havoc on inventories and hurt their bottom lines. The inflation-induced shift in demand this year has left retailers with not enough of the products customers want and too much of the stuff that they no longer need. Therefore, the industry has been forced to slash prices and offer deep discounts to shift inventory. Both should be over the worst of their inventory problems and post improved margins this quarter. The back-to-school season should provide a boost, but all eyes are on whether they have the right stock ahead of the festive season. Walmart is expected to report a 3.5% rise in comparable US sales and a 9% year-on-year drop in adjusted EPS to $1.32. Target is forecast to see a 2.5% rise in comparable sales and a sharper 28% drop in adjusted EPS to $2.19.

Home Depot (HD) vs Lowe’s (LOW)

Home improvement remains in demand despite the rise in the cost of living. Consumers appear to be spending on upgrades to their homes with retail sales data pointing toward a 10% rise across the industry in the third quarter. Meanwhile, they have not had the same problems with profitability as general retailers as they are able to pass on higher costs to consumers, which at the moment is countering fewer transactions. Around 45% of Home Depot’s customers are professional tradespeople, which is considerably more than Lowe’s (which sits closer to 25%) and should allow it to continue to outperform as consumers are more vulnerable in the current climate. Still, there are fears around the housing market and what it could mean for 2023, so the outlook will be keenly watched to see if there will be any moderation in demand. Home Depot is forecast to report 3% same store sales growth and a 5.5% rise in adjusted EPS to $4.14. Lowe’s is forecast to see same store sales return to growth for the first time in three quarters at 1.2%, while adjusted EPS is expected to rise 13% from last year to $3.08.

NVIDIA (NVDA)

The semiconductor space has been suffering from a myriad of headwinds. Demand has faltered as consumers spend less on tech, some areas are suffering from oversupply and curtailing prices, and geopolitical tensions between the US and China are providing more hurdles. This has led to expectations being severely curtailed. The slowdown in the gaming market has already knocked billions of its sales expectations for this year. Meanwhile, China, which accounts for around 25% of its sales, will be in focus. It had warned that new export bans would wipe off up to $400 million in sales this quarter but has since unveiled a new replacement chip that can get around the new rules. Datacentres, by far the biggest revenue driver, is expected to remain the bright spot with sales forecast to be up some 30% - although that would be the slowest growth this side of the pandemic, leading to concerns that this could also be stalling. Wall Street forecasts revenue will be down 17.6% from last year at $5.8 billion and a 40% drop in adjusted EPS to $0.71.

Alibaba (BABA)

Chinese stocks face fresh uncertainty as new Covid-19 restrictions plague the outlook for both supply and demand. Ecommerce growth is slowing. Its cloud computing arm is expected to see sales rise at its slowest pace on record at just 5.5%. Digital media and entertainment is forecast to post its third consecutive quarter of declining revenue. However, Alibaba could post its first improvement in adjusted Ebita margin since 2019, sending a signal it could be starting to prioritize profitability over growth amid the more challenging economic outlook as we approach 2023. That is expected to be driven by smaller losses from food delivery service Ele.me and e-commerce firm Lazada, which are both expected to have seen far better economics this quarter compared to last year. A strong control on costs would help sentiment. Analysts forecast revenue will rise 4.3% from last year to RMB209,243 million and for adjusted earnings per ADS to edge mildly higher to RMB11.23.

Tencent (TCEHY)

Things are even tougher at Tencent, which has been exiting more adventurous ventures and cutting costs amid ‘difficult revenue conditions’. The latest round of Covid-19 restrictions could further hit sentiment, but Tencent has said many of its operations will start to grow again ‘as China’s economy expands’. Analysts expect revenue to dip 0.5% from last year to RMB141.6 billion and EPS to fall for a fourth consecutive quarter to RMB3.12. Virtually all of its units – from gaming and social networks to advertising – are under pressure. Fintech and business services, which includes its cloud computing arm, could be the one bright spot. Advertising will continue to decline, with estimates pointing toward a 9.7% decline, but that will mark an improvement over the previous two quarters. Its operating margin is forecast to contract to 24.5% from 37% a year ago as costs continue to rise.

Sea (SE)

Sea, the Singaporean e-commerce, gaming, and fintech firm, is the midst of a turnaround as it strives to become sustainable but things could remain tough this quarter. Analysts believe revenue will rise 7.6% from last year in the third quarter to $3.02 billion – the slowest pace on record. The Adjusted Ebitda loss – its headline measure – is forecast to come in at $453.6 million, which will be significantly wider than the $165.5 million loss seen last year. Shopee, its e-commerce arm and the largest part of the business, is the center of attention as it is trying to make this profitable. The e-commerce adjusted Ebitda loss is pencilled-in at $584.9 million. Financial services revenue will pop but losses will widen, while gaming and digital entertainment, its only money-making business, is forecast to see revenue drop 15% as people spend more time outside compared to last year. A beat would help install confidence it is moving in the right direction and on the path to profitability. Sea has said it is hoping to escape the red in 2023, but analysts think it may take longer so the company is yet to convince markets of its plan.

Vodafone (VOD)

Consensus figures show markets are expecting Vodafone to report a tepid 0.3% rise in service revenue growth during the first half of the financial year, which would suggest a slowdown occurred in the second quarter considering the rise we saw in the first quarter. Overall revenue expected to rise 0.9% to EUR22.7 billion. Analysts at Bloomberg Intelligence are expecting problems in Italy, where competition is intensifying, and Germany, where a turnaround is underway, but said this will be countered by strength in the UK, with Spain holding the potential to deliver a positive surprise. Adjusted Ebitdaal – its headline figure – is estimated to fall 1% this quarter to EUR7.49 billion. Vodafone is aiming to deliver adjusted Ebitdaal of EUR15.0 billion to EUR15.5 billion over the full year, which would be up 0.7% to 4.0% from last year, and markets currently believe it will come in at the lower end of that range.

Burberry (BURBY)

Burberry, now under the leadership of CEO Jonathan Akeroyd for the past six months, has been another casualty of the Covid-19 lockdowns in China, which will be a major focus this week. The company, which makes around one-third of all its sales in China, reopened stores in June but fresh restrictions provides some uncertainty going forward. It has been trying to drive an improvement in other regions as a result, which is placing more pressure on its EMEIA segment to perform. Sales in China were down 35% in the first quarter and markets will be hoping for an improvement in the second. Overall, comparable store sales are expected to be up 4.7%, suggesting things have got better in the past three months. Analyst estimates point toward a 9.2% rise in revenue to £1.32 billion and an improved adjusted operating margin of 20.2% (vs 16.2% last year). Adjusted operating profit could jump 16% to £227.7 million. Adjusted EPS is expected to rise 24% to 41.0p. Burberry is aiming to deliver high single-digit revenue growth and 20% margins at constant currency over the medium term.

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